The Scottish Government likes the idea of getting into bed with Hyundai Heavy Industries (HHI) to drive the development and mass manufacture of floating offshore wind turbines, initially for deployment in Scottish waters.
So much so that a Memorandum of Understanding (MoU) has been drawn up with Scottish Enterprise and Highlands & Islands Enterprise (HIE) that commits them to “pursue opportunities for floating offshore wind projects” in Scotland.
While it is just an MoU, the very fact that it exists poses many questions and represents an existential threat to the very idea of Scotland ever building up an indigenous offshore renewables manufacturing capability and services supply chain underpinned by switched-on domestic investors and first-class original R&D.
We, the UK and Scotland, especially keep on boasting world leadership in offshore wind. But, as I have stated before, that’s an illusion.
The reality is that practically everything installed in our waters is of foreign design, with the vast majority of the turbines and the kit and caboodle that go with them are manufactured overseas and then installed and maintained by foreign brands.
We actually have very little real skin in the game at all. We get everything we need in someone else’s energy systems supermarket. Even a huge proportion of the wind farms built are foreign-owned too.
So what do we actually get out of it? Bit like a can of coke or fast food, short-term gratification through job creation coupled with a cumulatively negative impact on our economic health because there’s all too often not much else benefit.
Granted, HHI is the world’s largest shipbuilding company and a major manufacturer of the equipment which forms a critical part of the global offshore wind supply chain. It is very good at what it does.
But I’m sick to the back teeth of the massive reliance on Foreign Direct Investment (FDI), an inward investment that plagues Britain.
We seem incapable of doing much for ourselves. We are hooked on it. We’re the second hottest destination anywhere for FDI activity. And Scotland leads the way in the UK in this regard.
Indeed, the UK’s total inward investment stock is the second highest in the world, having recently passed £2 trillion.
More than 50% of the UK’s private sector’s R&D is carried out by foreign-owned firms.
Meanwhile, here in Scotland on the domestic corporate front, we currently endure the farce of two West Coast inter-island ferries being built on the Clyde which are multiples over budget and years late on delivery.
Those of you with long oil and gas industry memories may remember the farce of the drilling rig Ocean Alliance ordered by Britoil from Scott-Lithgow and delivered years late and massively over budget. The yard collapsed shortly after delivery.
Now, the UK political and economic development machine believes that inward investment brings an influx of wealth into our islands, helping to diversify the base of revenues, potentially generating additional tax revenues, not forgetting jobs.
However, FDI may also bring unsustainable development, such as poorly planned and rapidly built infrastructure projects and/or a lack of regard for local practices and customs.
Critics also note that local economies that seek to attract inward investments do so to the detriment of local business.
Smaller local firms especially cannot match the scope and price of existing, larger corporations and therefore their growth and existence tend to be threatened
Some other negatives variously cited include:
- Hindering domestic investment. Local companies start losing interest to invest in their domestic products and, more worryingly, banks refuse to take risk by lending, preferring to see HHI or other large corporations step in with a package including money wheedled from central government in London or Holyrood here in Scotland.
- FDI can also impact exchange rates to the advantage of one country and the detriment of another.
- When investors invest in foreign countries, they might notice that it is more expensive than when goods are exported. Employment is cut to the bone with heavy reliance placed on automation.
FDI can fail spectacularly, this happened in Scotland in the 1990s with Hyundai, which had been enticed by the government to build a semi-conductor manufacturing plant in Dunfermline.
Hyundai had planned a £2.4 billion two-phase development which would have created 2,000 jobs.
The project, announced in 1996, was halted in 1998 after the first phase was built and equipped but before production started.
The South Korean company called off the project because of the financial crisis at home and the collapse in the market for dram chips which the plant was intended to make.
Motorola, the US electronics group was encouraged by the government to pick up the pieces.
It invested about £1.3billion to increase its chip-making capacity in Scotland’s industry and said it would employ 1,350. In the event, only around 700 new jobs were created.
My recall is that it closed its semiconductor plant at South Queensferry, and transferred that 650-strong workforce to Dunfermline.
For Hyundai, this was a start-up from scratch. Motorola already employed 6,500 in Scotland but not for long..
In 2001 Motorola’s flagship Bathgate plant was shut with 3,100 jobs axed. The chip market had had its chips big-time. FDI had failed spectacularly again. Now it’s the Big Wind Era.
Energy Transition that genuinely benefits us all is the mantra. It is too early to determine what shape HHI’s wind farm floaters venture will take.
But you can bet that financial inducements will be substantial … of a scale that would go a long way towards Holyrood being able to invest in home-grown companies and nurture them properly.
As things stand, we appear to have just an MoU; it’s probably tissue-thin.
HHI senior VP Hannae Choi is perfectly clear; his company really does have “world-class know-how in designing and manufacturing floating structures”.
Why can’t Britain do things for itself, Choi and his colleagues probably ask; in the meantime rubbing their hands with glee.
Go visit our neighbours Denmark, The Netherlands, Germany, Finland, Belgium, France and especially Norway to discover just how far behind we really are.
Mind you, said neighbours won’t be very happy about the idea of Hyundai setting up shop just across the water!
If HHI does indeed invest here, it will probably render both the ORE Catapult in Glasgow and Net Zero Technology Institute in Aberdeen pointless wastes of taxpayers’ money.
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